General contractors go through a lot. In fact, we at I AM Builders like to call them unofficial firefighters because they’re constantly putting out fires all day long. Whether it be on the job site, or in the office, it’s one and the same.
Keeping your business flourishing and running smoothly can quickly become a game of survival, where you as the contractor are hunting day and night desperately hoping to catch some prey to feed your people.
We’ve been there, and we’ve seen it in hundreds of other contractors around the world. That’s why we’re going to highlight the 5 biggest pitfalls for you to avoid when starting or running a general, or any, contracting business.
Let’s dive in.
Relax. You Don’t Have to Know Everything.
First off, let’s face it: while most general contractors are experts of the operations of their business, most aren’t experts in the other aspects of business, such as marketing, sales, finance, business development, etc., which are just as important.
Understanding building codes, construction techniques, bid submission, subcontractor selection, and other important components involved in putting up an edifice is one thing, but to operate a company is something else entirely.
But here’s where it gets interesting…
If you look into the top entrepreneurs in the world, they all have surprisingly similar philosophies; create systems for everything, delegate people to manage/work on those systems, and focus on sales.
And if it’s working for every single successful entrepreneur, why wouldn’t you follow suit with your construction business?
This list details 5 brutal mistakes we see contractors making every day that’s actually doing them more harm than good. But keep the above theme in your head as you read, because they’re all geared to put you on the path practically every successful businessperson is on.
1. Contractors Are Losing an Average of $400k per Month in Sales by…
Not bidding jobs.
Bidding jobs can be very time-consuming, very fast. In fact, most contractors overlook this crucial aspect of their business simply because they have their schedules full.
The average one-person contractor should be bidding no less than 20 jobs per month. And that number is higher if you’re a bigger, more established company.
If the average contract value in construction is around $200k, and you win about 10% of your jobs, that means if you’re bidding 20, you should have 2 projects under your belt every single month.
Unfortunately, the reality is many contractors get bogged down with work on the job site, overseeing workers, and other tasks so that they don’t have the time to bid out jobs and focus on their sales/marketing.
The best solution to this is to either hire an in-house estimator or to outsource your estimating.
Both have their pros and cons, having someone in-house gives you someone who will know your company personally and know all your pricing, but they can end up being much more expensive than an estimating company.
Outsourcing estimating services on a per-project basis ends up being cheaper than hiring in-house estimator. Plus, you don’t have to worry about hiring, training, or managing an employee. On the flip side, you may not get as much personal assistance as you would with an employee dedicated to just your company.
At the end of the day, you just have to choose what works best for your own company. But the point remains, in order to consistently bid jobs and go after more business, the quickest way to free up your schedule is to delegate your estimating and bidding.
2. You Actually Lose Money When You’re on Your Own
So we already dealt with one of the biggest pitfalls new contractors face, which is consistently bidding out jobs. So now, we can breathe easy and focus on what’s happening on the job site.
In our construction consulting sessions, we always explain to contractors that they should be spending 80% of their time meeting new clients, selling jobs, visiting potential clients/job sites. And then the other 20% on management and operations.
The goal is to have a well-oiled machine that attracts leads, bids them out, and then does the work. And the person on top is the glue holding the company together.
Every construction company should have a:
- Project Management Team – Leading the work of a team to achieve goals and meet success criteria at a specified time. (Wikipedia)
- Field Supervision Team – Manages and oversees the performance of the field staff for a variety of projects, which can involve either engineering, construction, or the maintenance of existing landscapes and buildings. (Betterteam)
- Accounting Team – The presentation of financial information for internal purposes to be used by management in making key business decisions. (Investopedia)
- Purchasing Team – Team seeking reliable vendors or suppliers to provide quality goods at reasonable prices. negotiating prices and contracts. reviewing technical specifications for raw materials, components, equipment, or buildings. (Wikipedia)
Keep in mind that some employees can do some of each, or some can be fully dedicated to 1 single aspect. It’s up to your personal situation.
Delegating key aspects of the operations of the business combined with delegating the estimating process (see pitfall #1), significantly frees up your days.
And with more time suddenly in your day, you’re available to focus on the sales and marketing, which is the foundation to any company.
And it’s also what we address in the next item on this list.
3. Your Business Stays Stagnant When You Don’t…
Revenue is the oxygen to a business. It’s what keeps it alive.
And the revenue comes from sales, and sales comes from leads… see where this is going?
Where do you get your leads?
Some contractors get asked that and proclaim their business is all word-of-mouth.
Others will say they’ve just been in the business for so long they know enough people to get by.
Whether you’re in one of those groups or not, your business stays stagnant when you don’t have a steady stream of leads coming in.
That’s why if you have a predictable system to bring in leads, a predictable system to estimate and bid them out, and a predictable system to carry out the construction work…
You become dangerous.
In order to actually have that, it’s actually very straight-forward.
First, if you’re a commercial contractor you’re going to want to sign up for lead generation services like these:
Signing up for these services exposes you to many opportunities happening in your local area you may not have even been aware of. And for an affordable price too.
To start getting a steady stream of leads it’s about $75 – $150 a month.
On the flip side, if you’re a residential contractor, we recommend signing up for Home Advisor. They provide contractors direct contact to homeowners looking for their exact services. You pay an annual membership ($200) and then pay for each individual lead as it comes, which can end up being anywhere from $40 – $90.
By the way, if you’re interested in securing more leads for your construction business, check out our Xplode Strategy guide. It goes more in depth on what to do, who to talk to, and even what to tell potential clients to have people coming to you for work. On top of that, we have a lead generation program that’s personalized and as helpful as possible to grow your construction business.
4. You Lose Bids and Don’t Get the Job When You Don’t Follow Up
Putting it simply, clients give jobs to the people they’re familiar with.
If a potential client isn’t familiar with you or your company, your bid is very likely to only be used for better pricing from your competitors.
In other words, you can have a great system of getting leads and be pumping out bids like crazy, but if your potential client doesn’t know you, it’s very unlikely you’ll find as much success as you’re looking for.
A huge perk of bidding for someone you know well is you get the ability to adjust your price based on feedback, which helps significantly in the bidding process.
Here’s a quick visiting method for long-term relationships:
- Go to Google Maps and type one of the following.
- “Type of client” + in city
- “Type of client” + zip code
- “Type of client” + near me
- Google will give you a list of potential leads, click on each result, and save their contact information.
- Make a list of potential clients (around 20) and create a schedule to visit 5-10 potential clients. It can be all in one day or spread out throughout the week. (If you don’t have the time for that, outsourcing your estimating should help free up some of it)
5. You Miss Out on Hungry Clients When You’re Not Online
Every business needs a website, it’s non-negotiable.
It gives clients the ability to research your company. See what you’re about, see your past projects. Overall get a general feel for your company.
Put yourself in your client’s point of view, if you’re going to invest thousands of your hard-earned dollars on a project… wouldn’t you want it to be well-spent?
How powerful is it to be able to sell your company on auto-pilot just by having a professional website?
Most professional website creating agencies can charge $1000s of dollars for a website, but you can find great website creators on freelance sites like Fiverr and Upwork for much cheaper. Keep in mind though, most of the time you do get what you pay for.
Google Ads is something we believe every single contractor should be taking advantage of. So many potential clients are on Google hunting down quality contractors to work with, and you’re going to want to meet them where they are.
Clients researching companies on Google are in a ready-to-start mode. You can build a landing page on Unbounce, and then post it on Google Ads to start getting some ready-to-go traffic to your site. Then, you can use Facebook to retarget those same clients and show them how knowledgeable you are, and how you’re the perfect person for the job.
If this work confuses you and you need more info, or you’re very interested in learning more about online marketing, check out our guide on how to market a construction business.
Starting a contracting business can be daunting at first, and even the most experienced contractors can slip into dangerous pitfalls.
This list highlights 5 of the biggest traps we see many contractors making in their business, and hopefully, it sheds some light on you and your company.
By the way, if you need any help estimating projects, getting more leads, or getting consulting for your construction company, feel free to call us or visit our site at I AM Builders.